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Operator: Ladies and gentlemen, thank you for standing by. My name is Colby, and I’ll be your conference operator today. At this time, I would like to welcome you to the American Healthcare REIT Q3 2025 Earnings Conference Call. [Operator Instructions] I would now like to turn the call over to Alan Peterson, Vice President of Investor Relations and Finance. Please go ahead.

Alan Peterson: Good morning. Thank you for joining us for American Healthcare REIT’s Third Quarter 2025 Earnings Conference Call. With me today are Danny Prosky, President and CEO; Gabe Willhite, Chief Operating Officer; Stefan Oh, Chief Investment Officer; and Brian Peay, Chief Financial Officer. On today’s call, Danny, Gabe, Stefan, and Brian will provide high-level commentary discussing our operational results, financial position, changes related to our increased 2025 guidance and other recent news relating to American Healthcare REIT. Following these remarks, we will conduct a question-and-answer session. Please be advised that this call will include forward-looking statements. All statements made during this call other than statements of historical fact are forward-looking statements that are subject to numerous risks and uncertainties that could cause actual results to differ materially from those projected in these statements.

Therefore, you should exercise caution in interpreting and relying on them. I refer you to our SEC filings for a more detailed discussion of the risks that could impact our future operating results, financial condition and prospects. All forward-looking statements speak only as of today, November 7, 2025, or such other date as may otherwise be specified. We assume no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. During the call, we will discuss certain non-GAAP financial measures, which we believe can be useful in evaluating the company’s operating performance. These measures should not be considered in isolation or as a substitute for our financial results prepared in accordance with GAAP.

Reconciliations of non-GAAP financial measures discussed on this call to the most directly comparable measures calculated in accordance with GAAP are included in our earnings release, supplemental information package and our filings with the SEC. You can find these documents as well as an audio webcast replay of this conference call on the Investor Relations section of our website at www.americanhealthcarereit.com. With that, I’ll turn the call over to President and CEO, Danny Prosky.

Danny Prosky: Thank you, Alan. Good morning or good afternoon, everyone, and thank you for joining us on today’s call. I am very pleased to report that the third quarter was another very strong quarter for AHR. We continue to build upon our strong first half momentum, generating same-store NOI growth of 16.4% across the total portfolio, marking our seventh consecutive quarter of double-digit same-store NOI growth portfolio-wide. This performance once again reflects the depth and quality of our portfolio, our strategic initiatives, which include leveraging our platform across our operating portfolio, the strength of our regional operating partners and the enduring demand tailwinds that support health care real estate. Within our operating portfolio, our RIDEA structured segments, which include our integrated senior health campuses, also known as Trilogy, and our SHOP segment continue to drive outsized growth, which is the result of our team’s proactive and hands-on asset management approach.

As I look across our industry, I maintain my conviction that this is the best operating environment for long-term care that I’ve seen in my entire 33-year career. This is most evident to me when reviewing our strong RevPOR growth and the fact that Trilogy and SHOP same-store occupancies are currently above 90% and continue to trend in a positive direction. Shifting to our external growth activity, we’re executing diligently on scaling our operating portfolio with our regional operating partners. In aggregate, we have closed on over $575 million of acquisitions year-to-date, all of which is within our RIDEA segments. Among these new acquisitions, I’m happy to announce that we’re expanding our highly curated stable of operators. We introduced 2 new relationships to our group of operators this year, which will broaden our geographic diversification while reinforcing our focus on operators that share our values, including a strong employee culture, ability to deliver ongoing outsized financial performance and most importantly, a keen focus on delivering high-quality care and results for our residents.

I’d like to congratulate Stefan and the entire investments team, along with Ray Oborn and his senior housing asset management team again as they have continued to identify and acquire a tremendous volume of very high-quality managed senior housing assets. These acquisitions not only provide immediate earnings accretion to AHR, these assets should also provide strong ongoing organic earnings growth for years to come. Along with the acquisitions I just noted, the team has continued to backfill our pipeline of awarded deals, which now stands at well over $450 million. These transactions are expected to close in the fourth quarter and early 2026. As we execute on our external growth plans, we continue to demonstrate discipline and remain opportunistic in our capital markets and capital deployment activity, which should drive further earnings accretion in 2026 and future years.

We’re now on track to grow normalized FFO per fully diluted share by 20% over last year, while also continuing to improve our balance sheet metrics and leverage profile. As Brian will note during his remarks, our net debt to EBITDA at the end of the third quarter is now down to 3.5x. Our strategy remains consistent. We’re not simply chasing near-term accretion. We are building durable long-term growth through operating alignment with best-in-class regional operators, disciplined capital allocation and capital markets activity while always putting resident care and outcomes first. Finally, I’m proud to note that in September, we published our inaugural corporate responsibility report, publicly disclosing the governance, social and sustainability priorities that have long been embedded in AHR’s culture.

This milestone reflects our belief that responsible stewardship and performance are inseparable. Before turning the call over to Gabe, I want to thank the entire AHR team and our operator partners for their exceptional work. Together, we are executing with precision and purpose for all AHR stakeholders, providing high-quality care and outcomes for residents, which is leading to strong financial performance for our shareholders. And now, Gabe, over to you.

Gabriel Willhite: Thanks, Danny. Operationally, the third quarter of 2025 was another strong quarter for us with outstanding results across the business. Once again, we delivered sector-leading same-store NOI growth compared to the third quarter of 2024. Not only did we sustain the momentum from the first half of the year, but we also built a solid foundation for continued success with strong occupancy gains in the third quarter prior to entering what’s historically a slower winter season. That being said, occupancy trends into the fourth quarter suggest that seasonality could be muted due to the accelerating demand growth from the baby boomer population. Now let’s dive into our results in more detail, starting with Trilogy.

Same-store NOI grew 21.7% year-over-year. Occupancy averaged 90.2% in Q3, up more than 270 basis points from last year, while average daily rate increased roughly 7%. That performance reflects not only continued pricing power, but also ongoing improvement in quality mix. Within Trilogy, its high quality of care and outcome standards continue to drive outsized demand as residents, families and now to an increasing degree, Medicare Advantage plans seek out the highest quality of care providers. Trilogy is continuously working to add to and also to optimize its Medicare Advantage partnerships with the plans most aligned on quality, which is in turn increasing access for residents to Trilogy and driving more Medicare Advantage census growth across the Trilogy portfolio.

We expect this mix shift to drive robust revenue growth that reflects the strength of the platform for 2 primary reasons. One, Medicare Advantage reimbursement rates are significantly higher than other reimbursement sources and growing faster than other sources; and two, increasing accessibility for Medicare Advantage plans provides a tailwind for continued census growth. So for example, Medicare Advantage accounted for 7.2% of total resident days at Trilogy during the third quarter, an increase from 5.8% a year ago. It’s a great example of how Trilogy has proactively leveraged high-quality care and outcomes to identify the best partners and ultimately create economic value and yet again demonstrates Trilogy’s remarkable ability to utilize many different operational and strategic levers in order to drive continuously strong growth.

Turning to SHOP. Same-store NOI increased 25.3% with RevPOR up 5.6% year-over-year and NOI margins expanding nearly 300 basis points to 21.5%. We also achieved record move-in activity during the spring and summer seasons. And for the first time, like Danny mentioned, our SHOP same-store spot occupancy is currently above 90%. Those gains were achieved without significantly sacrificing pricing discipline, reinforcing our view that the secular demand for long-term care remains durable, especially for the highest quality operators as residents and families continue to invest in superior care and service. As demonstrated by our operating portfolio results, fundamentals remain extremely favorable. Construction starts across senior housing remain near historic lows, while demographic growth in the 80-plus cohort accelerates.

These structural supply-demand imbalances should support a multiyear runway for further occupancy gains, rate growth and NOI growth. As we move into the winter months, we’re confident and we’re well positioned to maintain the occupancy gains achieved through the busier spring and summer selling season. Overall, we continue to view this as the early innings for long-term care demand growth that’s being captured most effectively by operators with scale, quality outcomes and a strong regional presence. Trilogy and our SHOP partners certainly exemplify that. I’d like to thank each of our operator partners for their enduring commitment to their residents and their employees and their contributions to another very successful quarter for AHR. We know we could not deliver these results without them.

Finally, our team is actively executing on our strategic initiatives designed to enhance our operating platform. Our strategic alignment with Trilogy unlocks unique opportunities for outperformance and value creation. For example, we’re leveraging Trilogy’s centralized revenue management system across other operating partners. The analytics and also the operational strategies and functionality from that program, which combines a multitude of factors, including market rates, occupancy, unit-specific attributes and discount control features have already contributed to our growth at Trilogy by optimizing revenue, especially with respect to highly occupied facilities, which we know is a category that’s rapidly expanding. We’re in various pilot phases with our regional operators to extend this tool among other initiatives we’ve identified across our operating portfolio.

We continue to view this as a differentiator and a key component of our strategy as we plan for rapid expansion and look to support our regional operators as they scale to meet this transformative growth opportunity. I’ll now pass it to Stefan to discuss our external growth activity.

Stefan K. Oh: Thanks, Gabe. Since our last call, we have been very active, closing a number of transactions while continuing to backfill the pipeline with equally strong and high-quality investments. In doing so, our investment strategy remains unchanged as we continue to focus on accretive relationship-driven growth. We’re emphasizing opportunities where we have long-term conviction in the operators and markets and where our capital can directly improve care outcomes and long-term asset performance. During the quarter, we completed approximately $211 million of acquisitions and closed approximately $286 million of new investments subsequent to quarter end, bringing our year-to-date closed acquisitions to over $575 million within our operating portfolio.

These transactions expand our exposure to high-quality assets in strong regional markets and deepen existing relationships with trusted operators. A key highlight of our recent activity is our new partnership with WellQuest Living, who now manages 4 communities we acquired in California and Utah. WellQuest aligns closely with our mission to deliver best-in-class resident care through integrated wellness-focused environments. WellQuest will complement our current SHOP exposure on the West Coast, allowing us to access new submarkets that screen attractively within our investment framework and offering us the ability to underwrite potential acquisitions that will leverage WellQuest’s core care competencies as a high-quality needs-based senior living operator.

WellQuest rounds out the new operator relationships we previewed earlier this year. And between WellQuest and Great Lakes management, it has already allowed our team to evaluate even more potential off-market opportunities, which is something we strive to do with all our trusted regional operating partners. Beyond acquisitions, we continue to optimize our portfolio mix. During the quarter, we executed $13 million of non-core dispositions, further concentrating our capital on assets within our operating portfolio that can deliver superior risk-adjusted returns. Our team has not slowed in identifying new opportunities to complement our existing investments year-to-date as we maintain a pipeline of over $450 million in awarded deals that are still in the due diligence process or that we have added since we provided an update in early September.

We expect to close this awarded deal pipeline by the end of 2025 or early 2026. On the development front, we started several new development and expansion projects this quarter. Our in-process development pipeline now consists of projects with a total expected cost of roughly $177 million, of which we have spent approximately $52 million to date. We believe that these projects should extend our multiyear growth runway at attractive yields and the mix of new campuses, independent living villas and wing expansions should provide solid income at various points over the next few years, allowing for predictable cash flow that will translate to retained earnings for future new development starts to help mitigate future funding risks. To summarize our executed investment strategy thus far and our future plans, we are deploying capital deliberately, favoring operating partnerships where we see the best risk-adjusted returns, prioritizing newer assets and maintaining discipline on underwriting.

We believe this strategy will prove resilient as we scale across our operating portfolio with our various partners, and we expect it will generate strong, sustainable returns next year and in the future years to come. With that, I’ll turn it over to Brian.

Brian Peay: Thanks, Stefan. The third quarter of 2025 was another very solid quarter of organic earnings growth, disciplined execution of external growth by acquiring assets that we expect will provide sustainable earnings for years to come as well as select capital markets execution. We achieved normalized funds from operations of $0.44 per fully diluted share in Q3, reflecting a 22% increase year-over-year. This increase was made possible by greater than 20% same-store NOI growth from our operating portfolio segments, which continues to propel our earnings, additionally buoyed by the strong initial performance from the assets we’ve added to the portfolio over the last 3 quarters. Given our visibility into Q4 and the solid results achieved year-to-date, we are increasing and narrowing our full year 2025 NFFO guidance to a range of $1.69 to $1.72 from $1.64 to $1.68 per fully diluted share, implying growth in excess of 20% year-over-year at the midpoint.

This increase is driven by increased organic growth expectations and as we enter the remainder of the year with RIDEA spot occupancy north of 90% across our operating portfolio. As such, we are increasing our total portfolio same-store NOI growth guidance to a range of 13% to 15% from 11% to 14%. This increase is comprised of the following changes to segment level same-store NOI growth guidance. Integrated Senior Health campuses increased to a range of 17% to 20%, reflecting continued strength at Trilogy. SHOP increased to 24% to 26% as a result of the solid occupancy momentum through the summer selling season. Outpatient medical increased to 2% to 2.4% from the prior range of 1% to 1.5%, given positive renewal activity. Triple-net leased properties increased to negative 25 basis points to positive 25 basis points.

During the quarter, we sold approximately 2.9 million shares through our ATM program for $116 million in gross proceeds, and we settled 3.6 million shares under a previously announced forward sale for another $128 million. We also entered into new forward agreements totaling 6.5 million shares for $275 million in gross proceeds, providing additional funding flexibility as we pursue external growth opportunities. Our disciplined capital markets approach allows us to match equity inflows with investment timing, minimizing dilution, preserving optionality and building further capacity to continue adding high-quality assets to our portfolio. That discipline has also allowed us to continue to improve our balance sheet even as we’ve executed more than $0.5 billion of accretive acquisitions this year.

Our net debt-to-EBITDA ended the quarter at 3.5x, representing a 0.2x improvement from the end of the prior quarter and a 1.6x improvement from the third quarter of 2024. Stepping back, 2025 is shaping up as another milestone year for AHR, defined by significant organic earnings growth, continued deleveraging to provide capacity to scale our portfolio with our regional operating partners. As we enter the final quarter, our focus remains on maintaining this momentum and positioning the company for another strong year in 2026. With that, operator, we’d like to open the line for questions.

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Operator: [Operator Instructions] Your first question comes from the line of Ronald Kamdem with Morgan Stanley.

Ronald Kamdem: Great. Congrats on a great quarter. Just one quick one and a follow-up. I think the 90% spot occupancy, I think, was a sort of a key marking point for investors and the thesis was always that there would be operating leverage at this point to continue the growth going. So I just wonder if you could talk about just how much more occupancy upside do you see from here realistically in the portfolio and the pricing strategy as you sort of hit this point to continue to maximize growth.

Danny Prosky: All right. Well, I’ll go ahead and start with that one. So I would say the maximum upside from 90% to 100% is 10%. So that’s our max. I get asked all the time, where do you think you’re going to be at the end of next year? What is the maximum? The truth is I don’t know. What I’ve been saying all along is I expect over the next few years and over the past couple of years, which we’ve already seen, that we’re going to see all of the metrics continue to move in our favor just because of the supply-demand fundamentals, right? We’ve seen occupancy go up, we’ve seen RevPOR go up, we’ve seen margins, NOI, et cetera. I expect over time, that will continue. I don’t necessarily think that every single quarter is going to have higher occupancy than the prior quarter.

We’ve seen a lot of that. We did see a little bit of a downtick at the beginning of this year because of flu at our SHOP portfolio. Obviously, Trilogy did very well in Q1 because of the skilled side of the business. It’s now early November. It’s only been a little over a month since we ended the quarter. So far, I can’t say that anything has made me feel differently with what we’ve seen. That being said, we’ve got the holidays coming up. And we oftentimes see a little bit of a downturn right before the holidays. I can tell you that we consistently see Trilogy’s skilled occupancy drop a little bit right before Christmas, and then it picks up during the first 10 days of January, that seems to happen every year. I expect the trend will continue.

I expect us to continue to be able to price at a rate higher than inflation. I’ve been — I think it’s going to be around 200 basis points, sometimes a little more, sometimes a little bit less. But I think if you’re seeing 3% inflation, I think we should be able to price at a 5% increase or better. Clearly, as occupancy goes up, it gets a little bit easier to do that. And I expect that the positive trend will continue. As far as the maximum and the amount, it’s really hard to say.

Ronald Kamdem: Great. And then if I could just get a quick follow-up in there. Clearly, you guys have been busy on the external growth front in terms of starts, acquisitions, the pipeline. But I guess my question is just there was a Wall Street Journal article about a large PE player maybe even selling some senior housing. Just can you talk about the competitive environment? Why hasn’t it gotten more competitive given some of the unlevered returns that you guys are getting in the space?

Danny Prosky: Yes. So I saw that article as well. I know that at least one of the acquisitions we did was from that seller, and maybe more, but I know one for sure. I think that you’ve seen maybe a little bit more people buying, but I also think — I’ll let Stefan comment because he’s closer to it than I am. I also think you’ve seen more opportunities as results improve across the industry, I think you’ve seen more people come to market as the buildings that they’ve developed, let’s say, in the last 5 or 10 years, start performing better and better. I think you’ve seen more assets come to market. So demand may have ticked up a little bit, but I think supply has as well. I don’t know, Stefan, what do you think?

Stefan K. Oh: I think that’s exactly right. I think what you’ve been seeing is a lot of folks have been holding out on selling and kind of waiting for the performance to improve before they make a move. And now that’s happening, some of these private equity groups that have maybe even gone beyond the end of their expected fund life are now making moves to take these assets out to market. So it’s — I think you are seeing a bigger number of assets or a larger group of assets that are being put out in the market. But I also think that this is RIDEA, and it’s a difficult business. And so groups are — it’s a hard market to enter into, and it takes a long time for you to learn this business. And I don’t think they’re just going to jump in without being diligent about how they’re approaching this market or this industry.

Operator: Your next question comes from the line of Austin Wurschmidt with KeyBanc Capital Markets.

Austin Wurschmidt: So I want to go back to a topic from last quarter and something, Gabe, that you hit on a little bit in your prepared remarks. And just kind of help me understand the step down a little bit in ADR growth this quarter versus last quarter, specifically within that skilled segment of Trilogy. And would you just expect over time Medicare Advantage to continue to improve on a sequential basis given that partnership that you had previously put in place?

Gabriel Willhite: Yes. Austin, thanks for the question. It’s a good one. Trilogy has got a lot of levers to pull within the average daily rate in their skilled business. And part of that is like what we’ve talked about, optimizing quality mix to prioritize Medicare and Medicare Advantage plans and deemphasize lower reimbursement sources because Trilogy provides a high quality of care that comes with a high expense. And so they’re trying to optimize from those payer sources. So obviously, they’re prioritizing Medicare and Medicare Advantage plans. As you get to higher and higher occupancy, it’s easier to have for that prioritization process to take place. And even within those 2 different Medicare-driven payer sources, with Medicare Advantage plans, you have pricing that varies considerably among the different plans that you partner with.

What Trilogy is doing now is trying to find the Medicare Advantage plans that align with them on quality and are willing to provide a reimbursement that matches up with the quality that they’re providing. So I do think that they’ll have more flexibility, and they are constantly reevaluating which plans they’re partnered with and whether the rate makes sense. And I do think they’ll have a sustained ability to optimize those partnerships and in turn, really drive rate with Medicare Advantage. On the negative — more negative side, Medicare is not growing as fast as it was last year because it’s always retroactive to inflation and inflation has just come in. So last year’s rate increase for Medicare was over 6%. This year, the national rate is going to be 3.2%, I think Trilogy is going to be a little bit above that, not materially.

And so that would be a little bit of a growth headwind for Q4, but we do expect it to be at least partially offset by gains in Medicare Advantage.

Austin Wurschmidt: That’s very helpful. And then maybe sticking with Q mix, should the improvement in Q mix within Trilogy be a driver of both NOI growth and margin expansion as that continues to improve? Or is the trade-off and higher rate, an offset to the higher senior housing margin portion of it?

Danny Prosky: Yes. So it doesn’t take away from senior housing, right? The senior housing beds are separate from the skilled beds. But I think what you’ll see is you’ll see more Medicare and Medicare Advantage and less private and Medicaid. And certainly, you’re going to see higher NOI and higher margin with Medicare and Medicare Advantage than you will with private pay and Medicaid. On the AL beds, the AL and IL — unless Trilogy makes a decision to convert a wing from AL to skilled, those are separate lines of business. Does that make sense?

Austin Wurschmidt: Yes. No, that’s helpful. I mean I was talking about the entire component because the margin stepped down sequentially within Trilogy same-store pool. I recognize there’s some short-term expense maybe headwinds in there, but just talking kind of bigger picture and over time, given the fact that I think the resident days component of senior was up over 200 basis points sequentially and yet that margin stepped down. And I’m just trying to get a sense of how that trends over time because obviously, the rate you’re getting on the senior housing piece within Trilogy is much lower than the rates within the skilled component. So just trying to balance those 2, but understand how that flows to the bottom line as well.

Danny Prosky: Yes. So as I kind of start off by saying earlier, I expect margins will continue to improve. It doesn’t mean they’re going to go up every single quarter over the prior quarter. I mean, clearly, the margins, it was better this year than the same quarter last year. You’re right, it did tick down a little bit for Trilogy over Q3 — I’m sorry, versus Q2, excuse me. I think we saw something pretty similar last year. Several things happened in Q3 that affect the margin. And it’s not one item. They purchased a lot of flu vaccines, for example, in Q3, which is constrained the number of beds they have. It’s a big dollar number, but they don’t get the revenue until they administer those shots later on in the year. I think there’s a component also related to employee health insurance where employees — Trilogy self-insured, so employees go through the deductible and there’s a little bit more cost to Trilogy.

It’s really a bunch of things of that nature. The Q2 margin was jumped up considerably versus Q1. So I think it’s a combination of those things. Over time, I would expect the margin to continue to improve. It doesn’t mean we’re not going to have one quarter where the margin drops a little bit from the prior quarter.

Gabriel Willhite: And keep in mind, Trilogy is Midwestern concentrated, right? So the winter months come with higher expenses just related to the weather and things like that. But to Danny’s point, I think it’s spot on. We’re not sacrificing margin to go into 2 different Q mix here. We do expect that to result in higher margin.

Operator: Your next question comes from the line of Michael Carroll with RBC Capital Markets.

Michael Carroll: I wanted to touch back on Gabe’s earlier comments in his prepared remarks about leveraging Trilogy’s revenue management system with your existing SHOP tenants. I mean how much of the portfolio of that traditional SHOP portfolio is currently utilizing Trilogy software here? And can you provide some examples on how that’s driving better results? I mean, are we seeing that in the numbers today?

Gabriel Willhite: Mike, it’s a great question. I think we’re uniquely positioned, like I said, I think it’s a differentiator for us to have the type of alignment we do with a platform like Trilogy, who does it at a really high level. For those that don’t know, we’ve got a really unique incentive plan with Trilogy, where they have — we have the first of its kind manager equity plan where we issue their incentive compensation using the currency that’s AHR stock. So we’ve completely aligned their incentives to support our other SHOP operators in a way that’s pretty unique to us. What that does is gives Trilogy a financial incentive to meet with our operators to let them know what their best practices are, and that’s been going on for years.

We took it this year to the next level where we’ve got assessment tools and also dashboard capabilities that we can roll out from Trilogy’s platform to our shop operators as they desire to participate in it. I don’t want to overstate where we’re at right now. I don’t think the numbers today are fully reflective of the benefit of that Trilogy platform. We’re still in pilot phases with operators on that. I think what you’ll see is over the next year and 24 months, probably an outsized input from Trilogy’s platform as we really start to lean into it and optimize for it, and it’s not going to be just limited to revenue management, it’s going to be sales, marketing and search engine optimization. It’s going to be employee training, employee retention strategies.

It’s going to be potentially IT solutions. And even today, we’re leveraging Trilogy’s development capabilities because they’ve got internal development, to identify opportunities within our existing SHOP portfolio where we can basically copy the expansion strategy that Trilogy has been using effectively to expand very highly occupied buildings on land that we already own and derisk the development with really high IRRs. Unfortunately, not a ton of dollars available in that way, but we’re just incrementally growing in every way we can and really leaning into Trilogy’s platform in any way we can.

Danny Prosky: Yes. So we’ve already identified the first non-Trilogy campuses. We’ll be utilizing Trilogy’s development arm to do expansions and add builds.

Gabriel Willhite: And to be clear, to get out in front of maybe your follow-up question, Mike, we’re not planning to do ground-up development with other operators through Trilogy at this point. That’s not what — that’s not the strategy. It’s really to take opportunities that currently exist within the portfolio to expand on buildings that we already own.

Michael Carroll: How receptive are these operators to having the system kind of rolled out into their platform? And I guess, how difficult is it to actually implement? I mean, are we talking about a few quarters here to kind of get it implemented? Or is it a longer-term process?

Gabriel Willhite: It’s a great question. I think the reason why we’re partnered with the operators that we are is because they’re very good. With being very good, certainly comes a reluctance to have somebody else tell you what to do. They certainly are reluctant to having REITs tell them how to run their businesses, and I completely understand why. They want to run them the way they do. It’s, I think, far easier when you see somebody like Trilogy, who’s also an operator who’s gone through the same things that they have, who has the same issues that they have, but can demonstrate that they’ve executed at a high level on certain things. I don’t expect Trilogy to be de facto operating for other operators and using every one of these different verticals and strategies to push through to them to force them what to do.

What I do expect is for us to be able to identify certain soft points in certain operators and be dynamic in it and suggest, hey, if Trilogy can help you in this particular issue, please utilize them and do it. It also, I think, will be really helpful for operators that need to scale. So we prioritize regional operators because we think it provides better quality outcomes for our residents and you can control the culture better, provide upward mobility for your employees. There’s a lot of benefits that come from it. What you sacrifice is a little bit of scale and resources. If we can augment what they already do well with just some back-office support and more resources to help them scale, I think it’s a benefit for both and people are more willing to partner with Trilogy on those initiatives as well.

Brian Peay: And by the way, I would just add to that, that this is really a lifelong journey. I mean Trilogy was a great operator when we bought into them 10 years ago. They’re a much better operator today. And I would anticipate that they will continue to learn and grow and change and evolve. And all of those things would be available to our operator base.

Danny Prosky: And some are more receptive than others.

Operator: Your next question comes from the line of Farrell Granath with Bank of America.

Farrell Granath: My first question is about your pipeline. So I know this last quarter and then this quarter, we’ve been seeing an acceleration from the $300 million to $450 million. So I was wondering if you could add a few comments about that momentum and how to think about that going forward.

Stefan K. Oh: Yes. Thanks for the question. So I think if you think back to where we were a year ago, we were basically doing acquisitions where we had the inside track and then the opportunity for us to start doing external growth came about, and we were really just ramping up our pipeline at that point. So I think I think what you’re seeing now is the fruits of that and also the fact that we have added 2 new operators to the mix. So it’s been a very, I’d say, linear progression in terms of how we’ve gotten here. But I think what we’re seeing now is kind of where we expect it to be, and it’s giving us, I’d say, a strong end to 2026 — 2025 and then a good start for 2026.

Danny Prosky: Yes. So Farrell, I can’t tell you what we’re going to do in 2026. But I can tell you that we’re going into 2026 with a much more robust pipeline than when we entered 2025 simply because our stock didn’t reprice until late 2024 to the point where external growth became very attractive. But I feel pretty good about 2026.

Farrell Granath: Okay. And I also just wanted to get any updated thoughts on your MOB portfolio, seen an improvement in performance also with the guidance bump, but we’ve also seen peers selling large chunks of MOBs. I was curious if your thoughts around reinvesting yields for the sale of MOBs or if you’re content with the current performance.

Danny Prosky: So this is Danny, Farrell. So we started selling MOBs 4, maybe 5 years ago, and we’ve sold about 1/3 of them. I believe at the peak, we had about 112. And I think today, we’re somewhere in the 70 range, give or take. Now we’ve sold 1/3 as far as number of buildings. It’s less than 1/3 as far as NOI because we sold the worst 1/3, right? We sold the smaller ones, the ones that had less growth. I think you’re seeing a little bit of benefit there in our growth within MOB. It’s actually ticked up. And back during COVID, we were about 35% MOB from an NOI perspective. Last quarter, we were under 17%. And I expect that number will continue to go down. Number one, we’re divesting MOBs, although we’ve divested — we’re always going to be selling a few.

We sold most of them, but I think there’s a few more that we’ll be selling probably this year and next. And of course, we’re growing our RIDEA side of the business, both Trilogy and SHOP at a much faster clip. So it’s not — we’ve already been selling MOBs and redirecting that cash into seniors housing. I expect we’ll continue that. Now the MOBs that are remaining are ones we like. They tend to be more institutional, larger, better buildings. And I think we’ll see more growth out of those than we would have seen from the ones we sold. So we’re not necessarily looking to just get out of the business, but it’s certainly not where we see the best risk-adjusted returns today. We haven’t bought an MOB in years.

Operator: Your next question comes from the line of Michael Stroyeck with Green Street.

Michael Stroyeck: So we touched on this a bit already, but within the Trilogy business, the percentage of resident days coming from Medicare, Medicare Advantage has declined modestly as the year has progressed. I guess, is there a seasonality component to that? Or has it become, I guess, incrementally more difficult to push occupancy from those payer sources in recent months?

Gabriel Willhite: You’re exactly right, Mike. There’s a seasonality component to it. So typically, the trough of occupancy for skilled nursing is in September each year. You see through the summer months, kind of occupancy declines a little bit and then ramps and peaks in Q1 of the year kind of in the colder seasonal months. What we’re seeing, though, this year is less seasonality than what we typically do, and that’s what’s driving Trilogy’s 270 basis point plus occupancy increase year-over-year.

Michael Stroyeck: All right. And that same, I guess, seasonality applies to like the payer sources. Is that fair?

Gabriel Willhite: Yes.

Michael Stroyeck: Okay. And then I guess, sticking with Trilogy, with the higher acuity versus last year, how much have they had to increase headcount in recent quarters? And how quickly would Trilogy be able to pull back on expenses if there is a scenario where it does become harder to achieve additional increases in acuity?

Danny Prosky: Honestly, I couldn’t tell you exactly how much headcount they’ve added. I can tell you that when they have to flex their staffing, they typically do it with their flex force or with additional hours as opposed to additional staff. So they have — they set up their own travel nurse organization right around during COVID. And basically, if they need more or less staffing, they utilize those Trilogy travel nurses to flex the force up or down. It’s not so much that they hire and let people go. It’s more that they flex their existing staff.

Brian Peay: Yes. And keep in mind, Trilogy’s turnover is industry-leading, which is to say it’s less. So it’s around — it’s in the 40% range. Traditionally, for their peers, you’re going to see a 100% turnover rate. And it’s strictly because Trilogy is such a great operator that they’re able to retain their people. But I bring that up to say that essentially, hiring is a perpetual process at Trilogy. They are constantly replacing those 40% that are leaving and constantly trying to improve the workforce. And part of that is census driven, but it’s more just a perpetual way of life there.

Operator: [Operator Instructions] Your next question comes from Alec Feygin with Baird.

Alec Feygin: Maybe to speak for the first one, can you speak about the deal volume and the competition for the newer senior housing that you have identified? And how often are you likely to compete with the other public REITs for deals in your market?

Danny Prosky: It doesn’t feel — I mean, Stefan, you’re closer to it than I am. It doesn’t feel like it’s all that often. We tend to do smaller transactions, 1 building, 2 building as opposed to $0.5 billion or $1 billion deals. It doesn’t mean we haven’t done those, and we wouldn’t do those in the future. But it’s — with the deals that we’re competing on, a lot of them are brought to us through our operating partners. I mean, a significant percentage are brought to us through our operating partners. So when I look at who’s bidding, yes, there are some of the other REITs out there, but more often than not, it’s going to be a non-REIT competitor. I don’t know, Stefan, what would you add?

Stefan K. Oh: Yes. I mean, I would echo that. About half of what we’re — what we have in the pipeline closed have been deals that have been off market. And that’s one of the advantages that we have certainly had with the addition of WellQuest and Great Lakes to our operator pool is that not only are we diversifying into new markets and opening ourselves up to finding other locations and markets that we like that we can buy, but we’ve also been able to partner with them on a number of deals where they are just — they’re bringing them to us directly. As far as other marketed deals that we’re competing on, I mean, it is really a mixed bag. I mean we’re seeing — we are occasionally seeing the REITs. We’re occasionally seeing other PE that have been in the space for a while. And sometimes we’re seeing local investors or local operators as well.

Alec Feygin: Nice. Thanks for the color. Second one, maybe to invert an earlier question, but are there any best practices from regional operators that could help Trilogy, especially in new markets like Wisconsin? Is the — can it be a 2-way street? Has it been a 2-way street?

Danny Prosky: That’s a good question. I mean I’m sure they have. I mean we have an operator summit every year where a big chunk of it is talking about best practices. I’m trying to think of some of the specific things. Gabe, if you give any color or Stefan?

Stefan K. Oh: Yes. I mean the operator summit is very well attended. And I think regardless of who is in the audience, whatever operators up there talking about their best practices, they’re getting good attention. I mean we have definitely seen some cooperation and partnering with — between some of the operators and how to work on specific parts of the operations or when it comes to maybe bundling versus unbundling pricing and things like that. So there have definitely been several occasions where we’ve seen our operators benefiting from each other’s knowledge and experience.

Operator: Your next question comes from the line of Michael Goldsmith with UBS.

Michael Goldsmith: Now that we’re seeing more SHOP deals come in, can you talk a little bit in more detail around the acquisition strategy? Do you have a view of independent living versus assisted living versus memory care? And then are you targeting unstabilized deals or stabilized deals or you just more agnostic? Just trying to get more understanding of the strategy going forward.

Danny Prosky: I would say all of the above. Our acuity probably is — I think certainly in comparison to Welltower and Ventas, I would say we probably have a higher acuity portfolio, more AL and memory care, although we have IL and we acquire IL, it’s not that it’s all AL and memory care. We’re really looking for quality buildings that will continue to provide good earnings growth for the next 5 years, not just what can we buy today at a 7.5% or 8% cap that will be immediately accretive. And it’s a mix. I mean most of what we bought last year and this year tends to be newer product. A lot of it built in the last 10 years. Not all of it, we prefer newer buildings, but there hasn’t been a whole lot of development over the last 5 years.

So there’s not as much new product as there has been in years past. We’ve got some stabilized stuff that is in the 90s that we are at a more stabilized cap rate. And there’s a lot of newer assets, some stuff that just — if you look at the 5-building portfolio we did with Trilogy, 4 of those buildings only opened within the last year. So they’re all new, but they’re not yet stabilized. And with the stabilized buildings, you’re getting a lower in-place cap rate. You’re getting more growth opportunity. You’re getting a situation where once it’s stabilized, you’re going to get a higher yield than something that’s already stabilized, and a lower price per unit. You’re going to get more of a discount to replacement cost on something that’s unstable versus something that’s stable.

So it’s a mix, but we’re always trying to find assets that will continue to provide good organic earnings growth in ’26, ’27, ’28, ’29, et cetera.

Michael Goldsmith: Got it. And maybe just as a related follow-up. Just maybe can you talk a little bit more about the process and what you’re focused on? Are you focused on the operator? Are you building a data platform to analyze acquisitions in micro markets on certain demographics or incomes or home values? Just trying to get an understanding of where the focus is.

Danny Prosky: So I’ll start off, and then I’ll let Stefan finish. I’ll give him the hard part. But what I would say is that we tend to identify the operator before the building. We are more likely to work with our existing operators and say, look, here’s an opportunity in your market. And by the way, when we go see it, they’ll be with us. What do you think of this building? Oftentimes, they know it, maybe they’ve managed it in the past. Or hey, what’s in your market that you think we can go out there and try to buy before it goes to market? It’s — we typically don’t find a building and then put it under contract and then say, okay, now let’s figure out who’s going to operate it. So we tend to go after the operator before the building.

And in the case of Great Lakes and WellQuest, we identified them way before we went out and found buildings. We worked with them to help build the portfolio, and that’s why we’ve already got a substantial number with each operator. But I don’t know — and I know the processes are different, Stefan, but maybe you can give us a little bit more light on that.

Stefan K. Oh: Yes. I mean that is the main point. And that’s exactly what we’ve been doing in terms of going to the operator, identifying the operator, and that’s why we’ve had that strategy. It is really to find the operator who has the expertise in certain markets and regions. And then from that point, identify potential communities that we might want to acquire. And we are doing that hand-in-hand with our operators. We — if something comes to us on a marketed basis, literally, the first thing that we do is we go and we talk to our operator in that market, and we ask them what they think about it. And if it’s interesting enough, we’ll underwrite it together. We’ll go out and tour the property together and really go from beginning to end through the process all the way through transition to make sure that we’re fully aligned on every community that we’re acquiring.

And we feel much better conviction when we can do it in this manner than if we were just trying to do it on our own and identifying properties and then going out and trying to find the right operator. To us, that it needed to be reversed. We had to be working with the operator first.

Operator: Your next question comes from Seth Bergey with Citi.

Seth Bergey: I guess I just wanted to follow up a little bit on the pipeline. Of the kind of existing pipeline, is that primarily with existing operators in Trilogy? Or is that — are there any kind of other new operators that we should be thinking about that you’re looking to kind of add to the mix?

Danny Prosky: I think it’s all existing operators in Trilogy. There’s nothing in our pipeline that is — that would be an operator outside of our existing grocer.

Stefan K. Oh: Including WellQuest and Great Lakes, of course, now considering them existing operators.

Seth Bergey: Yes. And then I guess just following up a little bit around the kind of competition just as senior housing continues to perform well. Are you seeing any changes kind of with asset pricing as you kind of look at the opportunity set?

Stefan K. Oh: I think, as I mentioned earlier, really, we have not seen much of a shift. Perhaps there’s been maybe a moderate uptick. But quite frankly, it’s been very stable. I think buyers are — they’re still being very efficient in how they’re underwriting. We haven’t seen any kind of fervor in terms of driving up pricing on a consistent basis.

Operator: And with no further questions in queue, I’d like to turn the conference back over to Danny Prosky, President and CEO, for closing remarks.

Danny Prosky: All right. Well, thanks, everybody, for joining. We really appreciate your interest. And obviously, if there’s any follow-up questions, feel free to reach out via myself, Brian, Alan, and we’re always available. Thanks a lot. Have a great weekend.

Operator: This concludes today’s conference call. You may now disconnect.

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